Stocks Gain on Target, Home Depot Earnings, German Confidence

By Kayla Carrick and Stuart Wallace

Aug. 18 (Bloomberg) -- U.S. and European stocks rose, helping global equities rebound from the worst drop since April, following better-than-estimated earnings at Home Depot Inc. and Target Corp. and an increase in German investor confidence.

The MSCI World Index added 1.1 percent at 4:05 p.m. in New York, with 20 of 23 developed markets advancing. The Standard & Poor’s 500 Index climbed 1 percent to 989.67 as financial, commodity and technology companies led gains. Crude oil rose for the first time in three days. Treasuries fell, while the yen and dollar weakened against major trading partners as the rally in stocks reduced the appeal for safer assets.

“This is a bull market, and it will continue to do OK,” said Craig Hodges, a fund manager at Dallas-based Hodges Capital Management Inc., which oversees about $750 million. “There are necessary corrections you need in order for it to stay healthy. It’s a tug of war.”

The advance in equities today restored less than half of yesterday’s 2.8 percent slump in the MSCI World Index. The global benchmark index has rallied 52 percent from a 13-year low in March on speculation the worst of the global recession is over. The Dow Jones Industrial Average gained 82.07 points, or 0.9 percent, to 9,217.41. Europe’s Dow Jones Stoxx 600 Index added 1.3 percent.

Home Depot, the largest home-improvement retailer, added 3.1 percent to $26.93 to help lead the gain in the Dow industrials. The world’s largest home-improvement chain said second-quarter profit, excluding costs to close the company’s Expo business, was 67 cents a share. That beat the average estimate of 59 cents in a Bloomberg survey.

Target Jumps

Target rallied 7.6 percent to $44.32. Second-quarter net income declined to $594 million, or 79 cents a share, from $634 million, or 82 cents a share, a year earlier. Analysts estimated profit excluding some items of 66 cents, the average in a Bloomberg survey.

Hewlett-Packard Co. was also scheduled to release results today. Per-share earnings topped analysts’ estimates by 10 percent on average for the 469 companies in the S&P 500 that have reported results since June 17, according to data compiled by Bloomberg. Profits slumped about 30 percent in the period, a record eighth straight quarter of falling earnings.

‘Room to the Upside’

“There’s some room to the upside for companies if people get excited about the prospects for growth over the next couple of months, which I think they will,” said Jason Trennert, chief investment strategist at Strategas Research Partners, in an interview on Bloomberg Radio.

American Express Co. advanced the most in the Dow Jones Industrial Average, adding 4.3 percent to $31.69. The biggest U.S. credit-card issuer by purchases was upgraded to “outperform” by Keefe, Bruyette & Woods Inc., which cited “improving trends in credit.”

Goldman Sachs Group Inc. rallied 2.1 percent to $160.48. The company, which was the biggest U.S. securities firm before converting to a bank last year, was raised to “buy” from “neutral” at Pali Capital Inc.

CIT Group Inc. rose 2.9 percent to $1.40 as the century-old commercial lender seeking to avoid bankruptcy said its net loss narrowed to $4.30 a share in the second quarter from $7.88 a year earlier.